Admiral staff cash in after profit boost, as FTSE edges higher

Insurer Admiral has jumped more than 4% after well-received half year figures, which is good news for a start for its 4,000 staff who will each get free shares worth £1,500.

Admiral said half year profits had climbed 21% to £126.9m, turnover was up 33% and its interim dividend would be raised by 18%. On top of that its Spanish car insurance business made a profit for the first time. Admiral said the UK car insurance division was the key driving force behind the improved figures, with premiums up 14% and customer numbers 23% higher. Chief executive Henry Engelhardt said the company was pleased with the figures, saying 2010 was a year of great opportunity. He added:

Of course there are challenges. Our operations outside the UK and the Confused price comparison business are not as strong. Yes, Balumba, our insurance operation in Spain, made its first half yearly profit, but it still has work to do as an underwriter to build a sustainable, profitable, growing business.

Analysts are less convinced, with Charles Coyne at FinnCap saying:

Admiral remains fundamentally overvalued despite an excellent dividend increase. A bull position had built up in the shares ahead of these results, the market should now consider whether a multiple of 16 times net assets makes sense for a company with an admittedly high return on equity of nearly 80%.

Eamonn Flanagan at Shore Capital issued a sell recommendation saying:

Performance in UK motor was strong with a stable combined ratio of 89% and seemingly unaffected by problems affecting others in the sector re bodily injury claims etc. Reserve releases were slightly lower, at £17.3m, which is likely to raise eyebrows given the past growth in the book. However, it is the make-up of the profits that remains of greatest concern to us, with Confused going backwards again, £7.1m vs £11m, and the outperformance against our estimate down to better than expected profit commission, at £37m. To us, the quality of these earnings is weaker and with no upgrades expected, by us, we view the 21.5 times PE rating for 2010 dropping to 19 times in 2011 as much too rich. We view the shares as materially overvalued.

Despite this the profit news has sent Admiral shares 65p higher to £15.38, making it the biggest riser in the FTSE 100. Overall the leading index has edged higher after yesterday's shake-out on growing fears of a global economic slowdown, especially following poor US housing figures. Today the index is up 11.35 points at 5167.30.

Elsewhere BHP Billiton is 22.5p better at 1825.5p after its profits more than doubled, while Aggreko added 26p to £14.55 as the temporary power supply business announced a 23% jump in half year profits.